Another Bull Market Consolidation or. for the

Transcription

1 Another Bull Market Consolidation or Have Oil Prices Headed South for the John Cook Director, EIA Petroleum Division New York Energy Forum September 5, Winter?

2 Limited Spare Capacity Weather/ Hurricane Effects Strong Global Demand Low Forward Cover Geopolitical Concerns Solid Economic Growth

3 WTI Crude Oil Price: Forecast 70 Dollars per Barrel Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Sources: History: EIA; Projections: Short-Term Energy Outlook, August.

4 WTI Futures Curves: The Deferred Price Has Also Increased in Recent Years Dollars per Barrel /31/ 8/31/2005 8/31/2004 8/29/2003 8/30/ Months Source: New York Mercantile Exchange.

5 World Oil Demand Growth Oil demand growth, million bbl/d Rest of World US China World oil 80 demand, 78 million bbl/d Avg Source: EIA, Short-Term Energy Outlook, August.

6 Growth in World Consumption & Non-OPEC Production Demand Non-OPEC Supply* WTI Crude Oil Price Forecast MMBD change from previous year Demand growth exceeds non-opec supply growth 2003-Q Q Q Q Q Q3 -Q1 -Q Q Q $ Per barrel change from previous year *Includes OPEC non-crude production, MMBD= million barrels per day Source: EIA, Short-Term Energy Outlook, August.

7 Recent Non-OPEC Supply Growth Is Mostly from Former Soviet Union (FSU) Countries 2.5 Year-on-Year Growth in Total Liquids Oil Production Million Barrels per Day Q95 3Q95 1Q96 3Q96 1Q97 3Q97 1Q98 3Q98 1Q99 3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 Non-OPEC, Non-FSU FSU Source: EIA, Short-Term Energy Outlook, August.

8 Will OPEC Keep Markets Adequately Supplied? Million Barrels per Day '00 Q1 '00 Q3 '01 Q1 '01 Q3 '02 Q1 '02 Q3 History '03 Q1 '03 Q3 '04 Q1 '04 Q3 '05 Q1 '05 Q3 '06 Q1 '06 Q3 Projections '07 Q1 '07 Q3 OPEC Production OPEC Capacity Sources: History: EIA; Projections: Short-Term Energy Outlook, August.

9 OECD Total Commercial Oil Stocks Above Average Levels This Year 3,000 OECD Commercial Total Oil Inventories 2,900 2,800 Million Barrels 2,700 2,600 2,500 2, ,300 2,200 Source: International Energy Agency database, August.

10 But OECD Total Commercial Oil Stocks Low in Terms of Days Supply Days of Forward Consumption 66 OECD Commercial Total Oil Inventories Source: International Energy Agency database, August.

11 OECD Total Commercial Petroleum Product Stocks Are About Average in Absolute Levels 1,700 OECD Commercial Total Petroleum Product Inventories 1,600 Million Barrels 1,500 1,400 1, ,200 1,100 Source: International Energy Agency database, August.

12 OECD Total Commercial Petroleum Product Stocks Are Low in Terms of Days Supply Days of Forward Consumption 34 OECD Commercial Total Petroleum Product Inventories Source: International Energy Agency database, August.

13 $2005 Dollars per Barrel/Days Supply As Spare Capacity Increases in and 2007, OECD Days Supply Will Fall Jan-90 Jan-91 WTI Spot ($2005) OECD Days Supply World Excess Production Capacity (right axis) Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Sources: WTI: Reuters; OECD Days Supply: International Energy Agency; World Excess Production Capacity: U.S. Energy Information Administration estimates. Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan Million Barrels per Day

14 During Mid 1990 s, Surplus Capacity Did Not Affect Price WTI Price 2005$/Barrel WTI Crude Price vs. OPEC Surplus Crude Production Capacity (Jan Dec 1998) Surplus OPEC Capacity MMB/D Source: Reuters WTI; EIA Calculations

15 In Recent Years, Available Crude Capacity Affected Price 80 WTI Crude Price vs. OPEC Surplus Crude Production Capacity (Apr Jul ) 70 WTI Price 2005$/Barrel Surplus OPEC Capacity MMB/D Source: Reuters WTI; EIA Calculations

16 WTI Crude Oil Price / Inventory Relationship $80 $70 Nominal $ per Barrel $60 $50 $40 $30 $20 $ January April 2004 May June $ Billion Barrels Sources: Reuters database and International Energy Agency database, August.

17 OECD Inventories and Spare Production Capacity Have Explained Most of Recent Price Variation WTI Spot Price Nominal $/Barrel Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Dynamic Forecast (Inventories and Spare Capacity) Source: Reuters spot prices, EIA modeling.

18 U.S. Refining Capacity Surplus Disappearing, Creating Short-Term Challenge Million Barrels Per Day U.S. Refining Capacity & Inputs Operable Capacity Gross Inputs Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Source: U.S. Energy Information Administration.

19 Capacity Surplus Varies Seasonally Million Barrels Per Day Jan-00 U.S. Refining Capacity & Inputs Operable Capacity Jan-01 Jan-02 Gross Inputs Jan-03 Jan-04 Jan-05 Seasonal Squeezes Jan-06 Source: U.S. Energy Information Administration.

20 Seasonal Crude Use Down In Fall Worldwide 1500 Typical Crude Input Deviations from Annual Average Jan Mar May Jul Sep Nov Thousand Barrels per Day OECD North America OECD Pacific OECD Europe Source: BP World Statistics 2005.

21 Initially, Other Regions Help Balance U.S Losses Million Barrels Per Day U.S. Crude Input Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Crude Input Changes Aug Sep Oct Nov Dec US OECD Europe OECD Asia Source: International Energy Agency database, August, EIA Data

22 1.6 Gasoline Imports Are An Increasingly Important Supply Source U. S. Total Gasoline Imports Million Barrels per Day Source: U.S. Energy Information Administration.

23 U.S. Four-Week Average Finished Gasoline Demand Begins to Show More Typical Growth 10% 8% 6% 4% 2% 0% -2% -4% -6% Year-on-Year Four-Week Average Growth Using Weekly Data 1/9 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 8/6 8/27 9/17 10/8 10/29 11/19 12/10 12/ Source: EIA Weekly Petroleum Status Report.

24 U.S. Four-Week Average Finished Gasoline Demand Begins to Show More Typical Growth 6% Year-on-Year Four-Week Average Growth Using Weekly Data 4% 2% 0% -2% -4% 1/9 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 8/6 8/27 9/17 10/8 10/29 11/19 12/10 12/ Source: EIA Weekly Petroleum Status Report.

25 U.S. Four-Week Average Diesel Demand Has Returned to Pre-Hurricane Growth 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 1/9 Year-on-Year Four-Week Average Growth Using Weekly Data 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 Source: EIA Weekly Petroleum Status Report. 8/ /27 9/17 10/8 10/29 11/19 12/10 12/31

26 U.S. Four-Week Average Diesel Demand Has Returned to Pre-Hurricane Growth 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Year-on-Year Four-Week Average Growth Using Weekly Data 1/9 1/30 2/20 3/12 4/2 4/23 5/14 6/4 6/25 7/16 8/6 8/27 9/17 10/8 10/29 11/19 12/10 12/ Source: EIA Weekly Petroleum Status Report.

27 Chinese Oil Demand Continues Strong Growth Million Barrels per Day Q 2Q 3Q 4Q Sources: History: EIA; Projections: Short-Term Energy Outlook, August.

28 Much of China s Oil Demand Growth in Last 2 Years Has Come From Gasoline and Diesel 500 Thousand Barrels Per Day Gasoline Middle Distillates Source: BP World Statistics 2005.

29 Trans-Atlantic Arbitrage Brings Higher Distillate Imports NYH-ARA Price Differential U.S. Distillate Imports Cents per Gallon v /4/2002 5/4/2002 9/4/2002 1/4/2003 5/4/2003 9/4/2003 1/4/2004 5/4/2004 9/4/2004 1/4/2005 5/4/2005 9/4/2005 1/4/ 5/4/ Thousand Barrels per Day Source: EIA Weekly Petroleum Status Report.

30 OECD European Commercial Distillate Stocks Lie in the Upper Half of the Average Range 300 OECD Commercial European Middle Distillate Inventories Million Barrels Source: International Energy Agency database, August.

31 OECD European Commercial Distillate Stocks Are Relatively Low in Terms of Days Supply Days of Forward Consumption 28 OECD Commercial European Middle Distillate Inventories Source: International Energy Agency database, August.

32 Conclusions World oil demand growth, while off 2004 highs, is expected to continue at relatively high rates in and Non-OPEC oil supply is expected to grow by less than world oil demand in both and This will require either: More OPEC production, limiting any increase in spare production capacity, or Larger inventory drawdowns, sustaining relatively low stocks on a days supply basis. Global strength in distillate demand may mean a jump in U.S. spot prices to attract necessary imports this winter. Thus, oil markets are expected to remain tight this winter, with oil prices likely recovering from current relative seasonal softness. For job opportunities at EIA, go to or contact Dr. John Cook at john.cook@eia.doe.gov or (202)

33 Back-up Slides

34 Changes in Speculative Activity Do Not Explain Changes in WTI Prices. 100,000 $80 Number of Contracts 75,000 50,000 25, ,000-50,000-75,000 Net Short Net Long WTI Near-Month Weekly Average Price $70 $60 $50 $40 $30 $20 $10-100,000 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Nominal Dollars per Barrel $0 Net Position of Non-Commercial Participants in WTI Futures Contracts Since 2002 Source: NYMEX Commitment of Traders Report, Commodity Futures Trading Commission. Graph includes data up to May 2,.

35 Million Barrels per Day Light Product Imports Are An Increasingly Important Supply Source U. S. Total Light Product (Gasoline, Distillate, Jet Fuel) Imports Source: U.S. Energy Information Administration.

36 Product Imports Are An Increasingly Important Supply Source Million Barrels per Day U. S. Gross Product Imports Source: U.S. Energy Information Administration.

37 OECD Atlantic Basin Commercial Oil Stocks (Absolute Levels) 2,500 OECD Commercial Atlantic Basin Oil Inventories Million Barrels 2,400 2,300 2,200 2,100 2,000 1, ,800 Source: International Energy Agency database, August.

38 Regionally, OECD Atlantic Basin Commercial Oil Stocks Are Below Average in Terms of Days Supply Days of Forward Consumption 66 OECD Commercial Atlantic Basin Oil Inventories Source: International Energy Agency database, August.

39 OECD North American Commercial Oil Stocks (Absolute Levels) 1,500 OECD Commercial North American Oil Inventories 1,400 Million Barrels 1,300 1,200 1, , Source: International Energy Agency database, August.

40 OECD North American Commercial Oil Stocks Also Low in Terms of Days Supply Days of Forward Consumption 60 OECD Commercial North American Oil Inventories Source: International Energy Agency database, August.

41 OECD European Commercial Oil Stocks (Absolute Levels) 1,100 OECD Commercial European Oil Inventories 1,050 Million Barrels 1, Source: International Energy Agency database, August.

42 OECD European Commercial Oil Stocks About Average in Terms of Days Supply Days of Forward Consumption 72 OECD Commercial European Oil Inventories Source: International Energy Agency database, August.

43 OECD Pacific Commercial Oil Stocks (Absolute Levels) 550 OECD Commercial Pacific Oil Inventories Million Barrels Source: International Energy Agency database, August.

44 OECD Pacific Commercial Oil Stocks Once Again Low in Terms of Days Supply Days of Forward Consumption 65 OECD Commercial Pacific Oil Inventories Source: International Energy Agency database, August.

45 OECD Atlantic Basin Commercial Gasoline Stocks (Absolute Levels) 440 OECD Commercial Atlantic Basin Gasoline Inventories Million Barrels Source: International Energy Agency database, August.

46 OECD Atlantic Basin Commercial Gasoline Stocks Well Below Average in Terms of Days Supply Days of Forward Consumption 38 OECD Commercial Atlantic Basin Gasoline Inventories Source: International Energy Agency database, August.

47 OECD North American Commercial Gasoline Stocks (Absolute Levels) 280 OECD Commercial North American Gasoline Inventories Million Barrels Source: International Energy Agency database, August.

48 OECD North American Commercial Gasoline Stocks (Days Supply) Days of Forward Consumption OECD Commercial North American Gasoline Inventories Source: International Energy Agency database, August.

49 OECD European Commercial Gasoline Stocks (Absolute Levels) 170 OECD Commercial European Gasoline Inventories Million Barrels Source: International Energy Agency database, August.

50 OECD European Commercial Gasoline Stocks (Days Supply) Days of Forward Consumption 52 OECD Commercial European Gasoline Inventories Source: International Energy Agency database, August.

51 OECD Pacific Commercial Gasoline Stocks (Absolute Levels) Million Barrels OECD Commercial Pacific Gasoline Inventories Source: International Energy Agency database, August.

52 OECD Pacific Commercial Gasoline Stocks (Days Supply) Days of Forward Consumption OECD Commercial Pacific Gasoline Inventories Source: International Energy Agency database, August.

53 OECD Atlantic Basin Commercial Distillate Stocks (Absolute Levels) 550 OECD Commercial Atlantic Basin Middle Distillate Inventories Million Barrels Source: International Energy Agency database, August.

54 OECD Atlantic Basin Commercial Distillate Stocks Also Low in Terms of Days Supply Days of Forward Consumption 28 OECD Commercial Atlantic Basin Middle Distillate Inventories Source: International Energy Agency database, August.

55 OECD North American Commercial Distillate Stocks (Absolute Levels) Million Barrels 250 OECD Commercial North American Middle Distillate Inventories Source: International Energy Agency database, August.

56 OECD North American Commercial Distillate Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial North American Middle Distillate Inventories Source: International Energy Agency database, August.

57 OECD Pacific Commercial Distillate Stocks (Absolute Levels) 110 OECD Commercial Pacific Middle Distillate Inventories 100 Million Barrels Source: International Energy Agency database, August.

58 OECD Pacific Commercial Distillate Stocks About Average in Terms of Days Supply Days of Forward Consumption 22 OECD Commercial Pacific Middle Distillate Inventories Source: International Energy Agency database, August.

59 OECD Atlantic Basin Commercial Crude Oil Stocks (Absolute Levels) 850 OECD Commercial Atlantic Basin Crude Oil Inventories Million Barrels Source: International Energy Agency database, August.

60 OECD Atlantic Basin Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial Atlantic Basin Crude Oil Inventories Source: International Energy Agency database, August.

61 OECD North American Commercial Crude Oil Stocks (Absolute Levels) 500 OECD Commercial North American Crude Oil Inventories 475 Million Barrels Source: International Energy Agency database, August.

62 OECD North American Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial North American Crude Oil Inventories Source: International Energy Agency database, August.

63 OECD European Commercial Crude Oil Stocks (Absolute Levels) 400 OECD Commercial European Crude Oil Inventories 375 Million Barrels Source: International Energy Agency database, August.

64 OECD European Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 28 OECD Commercial European Crude Oil Inventories Source: International Energy Agency database, August.

65 OECD Pacific Commercial Crude Oil Stocks (Absolute Levels) Million Barrels 220 OECD Commercial Pacific Crude Oil Inventories Source: International Energy Agency database, August.

66 OECD Pacific Commercial Crude Oil Stocks (Days Supply) Days of Forward Consumption 32 OECD Commercial Pacific Crude Oil Inventories Source: International Energy Agency database, August.